Technical Analyst, Sudarshan Sukhani is of the opinion that momentum traders can buy sugar stocks on dips.
Sukhani told , "Shree Renuka is touching all time highs so that is certainly the leader in this pack. Balrampur Chini has a better chart because it corrected much less as compared to Bajaj Hindusthan, but beyond that, probably Bajaj Hindusthan had run up more than it was justified. So essentially the message is that sugar is a buying opportunity for momentum traders, I don’t know about investing in this sector, it’s difficult to make that judgment, but this is all about momentum. So in sugar you go long and if you buy it on the dips you are going to make some money on these stocks."
Tuesday, July 28, 2009
Gammon India plunges 14%
Gammon India touched an intraday high of Rs 146.45 and an intraday low of Rs 121.25. At 12:18 pm, the share was quoting at Rs 122.25, down Rs 20, or 14.06%.
It was trading with volumes of 149,320 shares. Yesterday the share closed down 2% or Rs 2.90 at Rs 142.25.
It was trading with volumes of 149,320 shares. Yesterday the share closed down 2% or Rs 2.90 at Rs 142.25.
RBI credit policy: No change in rates but change in stance
The Reserve Bank of India (RB) has left key interest rates unchanged. Inline with a poll, it has maintained status quo on the credit reserve ratio (5%), repo (4.75%) and reverse repo (3.25%) rates.
However, there is a change in its dovish stance seen earlier. It has increased its growth projections. FY10 GDP has now been maintained at 6% with an upward bias.
Inflation continues to be higher on RBI's radar. It is now projected at 5% from the earlier 4%.
The pall of gloom still hangs over the economy. That seemed to be the RBI Governor D Subbarao undelying mesage. In the report, he said the overall macro scenario is still uncertain. "Export demand remains weak. The services sector is sluggish on lagged impact of weak industry growth."
He hoped the government's monetary, fiscal steps would boost domestic demand. "The domestic, external financing environment has improved since H2 FY09. The business outlook has turned positive. RBI will continue to keep its eye on credit growth in the system"
How do experts rate the policy?
Sonal Varma, India Economist, Nomura Financial Advisories & Securities, feels today status quo from RBI suggests they are done with what they had to do on the policy front. "The key question going forward will be how long will it maintain this sort of accommodative or neutral policy environment. There are three key factors that RBI will be looking out for. One is on the growth outlook and how that pans out. Second is the government borrowing programme and third is the credit growth. The government and RBI have already front-loaded a large part of the borrowing programme. By the end of this calendar year, much of the borrowing programme will be through. Yesterday, RBI did mention that they are seeing nascent signs of credit growth picking up. The upward bias on the RBI’s growth projection clearly shows that once the monsoon situation is clear, there will be an increase in RBI’s GDP growth estimate also."
Nilesh Shah, Deputy MD, ICICI Prudential AMC, said the policy was in line with the expectations. Applauding the central bank's efforts, he said, "RBI has been managing the tough economic environment well. It is a policy which is trying to take away the accommodative stance and bring it to neutral gear by letting market forces play out and let the economy gain its own momentum."
Hemant Mishr, Head Global Markets South Asia, Standard Chartered Bank, feels RBI's commitment towards liquidity is comforting.
Jehangir Aziz, Chief Economist, JP Morgan, said the policy is fairly neutral. But was quick to add that one has to make sure that the neutrality is implemented in reality between this and in the next policy stance. "The economy still needs easy liquidity and monetary conditions. RBI is trying to present a balanced view about its concerns with growth as well as concerns with inflation."
Sanjiv Bajaj, MD, Bajaj Finserv & Investments, cheers RBI's move of encouraging banks to cut rates. "But I don’t think they can tell banks to lend more. That does not mean lend recklessly. If you have to see consistent growth coming, we have to see more consumer going out there because that will spur demand, that will cause corporates to start producing more raising capacity."
Where are interest rates headed?
Sunil Kalra, Director Head-Trading Fixed Income and Currencies, Citibank India, expects RBI to maintain a neutral stance going forward from its easing bias until now. He believes a large part of the previous rate hikes have already been priced in. Any rate hike by RBI, Kalra said, will be much quicker than what the market is expecting. "The market does expect some amount of rate hikes given that the one-year swap is currently around 4.2%."
Varma sees credit growth picking up around September-October, which will continue into early 2010. “This is when we should start seeing RBI move liquidity from the current accommodative excess to a more normal levels before it actually moves into rate hiking cycle next year."
According to Bajaj, there is a feeling in the market that money supply could get tighter six-nine months down the line.
The bond market reaction to the Credit Policy has been tempered. The benchmark yield remains below 7%. What is the road ahead for bond markets?
Shah feels yields may have to face the rising trend of inflation. "Open market operations by RBI will have a higher impact on yields. Hence we expect yields to be rangebound." He advises investors to invest in short-term bond funds, liquid plus, and liquid kind of fund as there will be no adverse impact of rising interest rates. "If there are people who can take a little bit of volatility on their side, then there is opportunity in income and gilt fund."
Kalra too shares Shah’s views on inflation impacting yields in the longer-term. “The inflation bet is a bit hawkish and there could be a pressure in the longer end. One could see the bond curve steepened a bit more from what it is.”
He does not expect any major reactions to today's policy as participants were factoring a status quo. He also expects sanity in the market as there is Rs 1,25,000 crore which is currently in the system. "This has been the big reason why bond market yields are where they are. This will continue to ensure that it does not fly off the handle."
How should one play banking stocks now?
According to Shah, news from the policy has already been discounted into the market. He feels the behaviour of banking stocks will depend on what happens to net interest margins, rather than yield movements.
However, there is a change in its dovish stance seen earlier. It has increased its growth projections. FY10 GDP has now been maintained at 6% with an upward bias.
Inflation continues to be higher on RBI's radar. It is now projected at 5% from the earlier 4%.
The pall of gloom still hangs over the economy. That seemed to be the RBI Governor D Subbarao undelying mesage. In the report, he said the overall macro scenario is still uncertain. "Export demand remains weak. The services sector is sluggish on lagged impact of weak industry growth."
He hoped the government's monetary, fiscal steps would boost domestic demand. "The domestic, external financing environment has improved since H2 FY09. The business outlook has turned positive. RBI will continue to keep its eye on credit growth in the system"
How do experts rate the policy?
Sonal Varma, India Economist, Nomura Financial Advisories & Securities, feels today status quo from RBI suggests they are done with what they had to do on the policy front. "The key question going forward will be how long will it maintain this sort of accommodative or neutral policy environment. There are three key factors that RBI will be looking out for. One is on the growth outlook and how that pans out. Second is the government borrowing programme and third is the credit growth. The government and RBI have already front-loaded a large part of the borrowing programme. By the end of this calendar year, much of the borrowing programme will be through. Yesterday, RBI did mention that they are seeing nascent signs of credit growth picking up. The upward bias on the RBI’s growth projection clearly shows that once the monsoon situation is clear, there will be an increase in RBI’s GDP growth estimate also."
Nilesh Shah, Deputy MD, ICICI Prudential AMC, said the policy was in line with the expectations. Applauding the central bank's efforts, he said, "RBI has been managing the tough economic environment well. It is a policy which is trying to take away the accommodative stance and bring it to neutral gear by letting market forces play out and let the economy gain its own momentum."
Hemant Mishr, Head Global Markets South Asia, Standard Chartered Bank, feels RBI's commitment towards liquidity is comforting.
Jehangir Aziz, Chief Economist, JP Morgan, said the policy is fairly neutral. But was quick to add that one has to make sure that the neutrality is implemented in reality between this and in the next policy stance. "The economy still needs easy liquidity and monetary conditions. RBI is trying to present a balanced view about its concerns with growth as well as concerns with inflation."
Sanjiv Bajaj, MD, Bajaj Finserv & Investments, cheers RBI's move of encouraging banks to cut rates. "But I don’t think they can tell banks to lend more. That does not mean lend recklessly. If you have to see consistent growth coming, we have to see more consumer going out there because that will spur demand, that will cause corporates to start producing more raising capacity."
Where are interest rates headed?
Sunil Kalra, Director Head-Trading Fixed Income and Currencies, Citibank India, expects RBI to maintain a neutral stance going forward from its easing bias until now. He believes a large part of the previous rate hikes have already been priced in. Any rate hike by RBI, Kalra said, will be much quicker than what the market is expecting. "The market does expect some amount of rate hikes given that the one-year swap is currently around 4.2%."
Varma sees credit growth picking up around September-October, which will continue into early 2010. “This is when we should start seeing RBI move liquidity from the current accommodative excess to a more normal levels before it actually moves into rate hiking cycle next year."
According to Bajaj, there is a feeling in the market that money supply could get tighter six-nine months down the line.
The bond market reaction to the Credit Policy has been tempered. The benchmark yield remains below 7%. What is the road ahead for bond markets?
Shah feels yields may have to face the rising trend of inflation. "Open market operations by RBI will have a higher impact on yields. Hence we expect yields to be rangebound." He advises investors to invest in short-term bond funds, liquid plus, and liquid kind of fund as there will be no adverse impact of rising interest rates. "If there are people who can take a little bit of volatility on their side, then there is opportunity in income and gilt fund."
Kalra too shares Shah’s views on inflation impacting yields in the longer-term. “The inflation bet is a bit hawkish and there could be a pressure in the longer end. One could see the bond curve steepened a bit more from what it is.”
He does not expect any major reactions to today's policy as participants were factoring a status quo. He also expects sanity in the market as there is Rs 1,25,000 crore which is currently in the system. "This has been the big reason why bond market yields are where they are. This will continue to ensure that it does not fly off the handle."
How should one play banking stocks now?
According to Shah, news from the policy has already been discounted into the market. He feels the behaviour of banking stocks will depend on what happens to net interest margins, rather than yield movements.
Adani Power IPO subscribed 3.8 times; most bids at Rs 100
The initial public offering of Adani Power has seen huge investor interest and was subscribed 3.8 times within the first few minutes of its opening, quoting sources. Maximum bids for the initial public offering of 301,652,031 shares were at Rs 100 a share.
Confirming this development, Ameet Desai, Director, Adani Power, said most bids had indeed come in at Rs 100 per share. He said the company will take a decision on pricing during the closing of the IPO.
According to Desai, the largest anchor investor allocation is to T Rowe Price.
The company, he said, is likely to list its shares around August 20.
Here is a verbatim transcript of the exclusive interview with Ameet Desai
Q: How much has the issue done so far in the first 45 minutes of opening?
A: It’s about 3.5 times over the subscriptions which we have received in first one hour and most of these are large bids from large investors.
Q: And at what prices has this 3.5 times book made?
A: Most of the bids except one are all at Rs 100 is what I have been told by the advisors, I am actually currently engrossed doing the road shows.
Q: Even if the hits are mostly towards Rs 100 per share will the management look favourably at leaving something on the table and perhaps pricing it to the lower end of the band?
A: Pricing is something on which we will take a decision on the close of that issue, I just want to say that this is an extremely gratifying experience with investors posing their full confidence in India story and in Adani power as a power opportunity. We are certainly feeling extremely overwhelmed and thankful to the investors so I am sure like all our decisions we will take the decision and the room for the upside.
Q: What kind of feedback are you getting at these road shows because you are referring from some investors that there is a concern on the valuations for the Adani Power IPO, I know it’s many times oversubscribed and even though people feel that on the valuations front its been priced at a little on the premium side?
A: Of several investors that we have met over the last one week leaving a handful, not more people have really expressed concern on valuations and the story has been extremely well received and we are seeing that investors are actually waiting to participate in Indian infrastructure story and in Indian power sector.
Q: Can you confirm the name of anchored investors who bought at Rs 95?
A: Some of the names like Sundaram MF etc on the local side and then we have Ecofin, T Rowe Price, Legg Mason, AIC of Canada and a couple of more investors and even this participation has clearly come with an understanding that whatever is the final pricing, they are willing to go to that level and 5.2 crore shares which are allocable and we have the demand of 9.4 crore shares.
Q: It was all done at Rs 95 pending the final price of the issue?
A: Yes it has done with Rs 95 with clearly instructions on the depositary side that if the price moves to Rs 100 then this will move to Rs 100.
Q: Who has the largest allocation being done to amongst the anchor investors?
A: T Rowe Price.
Q: of the 3.5 times book which has been done already in the first one hour of trade, can you give some sense of a retail response and whether its come in, because retail typically comes in on the last day but have you seen any initial signs of nibbling from retail?
A: Not yet, and as you said, its too early for retail people to come to the market but what we hear from the distribution channels of the broking houses and the brokers the response for participation seems to be on a very positive side.
Q: Given your calculations of how long it will take to process, have you come up with a rough date of listing, even a ballpark date of when the stock may list?
A: This should be around August 20.
Confirming this development, Ameet Desai, Director, Adani Power, said most bids had indeed come in at Rs 100 per share. He said the company will take a decision on pricing during the closing of the IPO.
According to Desai, the largest anchor investor allocation is to T Rowe Price.
The company, he said, is likely to list its shares around August 20.
Here is a verbatim transcript of the exclusive interview with Ameet Desai
Q: How much has the issue done so far in the first 45 minutes of opening?
A: It’s about 3.5 times over the subscriptions which we have received in first one hour and most of these are large bids from large investors.
Q: And at what prices has this 3.5 times book made?
A: Most of the bids except one are all at Rs 100 is what I have been told by the advisors, I am actually currently engrossed doing the road shows.
Q: Even if the hits are mostly towards Rs 100 per share will the management look favourably at leaving something on the table and perhaps pricing it to the lower end of the band?
A: Pricing is something on which we will take a decision on the close of that issue, I just want to say that this is an extremely gratifying experience with investors posing their full confidence in India story and in Adani power as a power opportunity. We are certainly feeling extremely overwhelmed and thankful to the investors so I am sure like all our decisions we will take the decision and the room for the upside.
Q: What kind of feedback are you getting at these road shows because you are referring from some investors that there is a concern on the valuations for the Adani Power IPO, I know it’s many times oversubscribed and even though people feel that on the valuations front its been priced at a little on the premium side?
A: Of several investors that we have met over the last one week leaving a handful, not more people have really expressed concern on valuations and the story has been extremely well received and we are seeing that investors are actually waiting to participate in Indian infrastructure story and in Indian power sector.
Q: Can you confirm the name of anchored investors who bought at Rs 95?
A: Some of the names like Sundaram MF etc on the local side and then we have Ecofin, T Rowe Price, Legg Mason, AIC of Canada and a couple of more investors and even this participation has clearly come with an understanding that whatever is the final pricing, they are willing to go to that level and 5.2 crore shares which are allocable and we have the demand of 9.4 crore shares.
Q: It was all done at Rs 95 pending the final price of the issue?
A: Yes it has done with Rs 95 with clearly instructions on the depositary side that if the price moves to Rs 100 then this will move to Rs 100.
Q: Who has the largest allocation being done to amongst the anchor investors?
A: T Rowe Price.
Q: of the 3.5 times book which has been done already in the first one hour of trade, can you give some sense of a retail response and whether its come in, because retail typically comes in on the last day but have you seen any initial signs of nibbling from retail?
A: Not yet, and as you said, its too early for retail people to come to the market but what we hear from the distribution channels of the broking houses and the brokers the response for participation seems to be on a very positive side.
Q: Given your calculations of how long it will take to process, have you come up with a rough date of listing, even a ballpark date of when the stock may list?
A: This should be around August 20.
Monetary Policy review –First quarter FY10
Highlights:
Bank Rate kept unchanged at 6%.
Repo rate and Reverse Repo Rate kept unchanged at 4.75%& 3.25%
respectively.
Cash Reserve Ratio (CRR) kept unchanged at 5%.
Real GDP growth projection for FY10 is placed at 6.0%.
WPI inflation is projected at around 5% by end-March 2010 vs. 4.0%
projected earlier. The base effect, which is generating negative inflation is
projected to completely wear off by October 2009.
Macroeconomic and Monetary Developments
The Real Economy
The Indian economy grew by 6.7% in 2008-09 according to the revised estimates of
the Central Statistical Organisation (CSO) lower than the growth of 9.0 %in 2007-08.
The deceleration in GDP growth was largely due to the adverse impact of the global
economic crisis.
Price Situation
The WPI inflation, which was on a path of sharp decline from the high peak level of
August 2008, turned negative in June 2009, and since then the negative inflation
continues (-1.17 per cent as on July 11, 2009). The decline in the year-on-year
inflation essentially reflects the statistical factor of high base that emanated from
sharp increases in commodities prices during the first half of 2008-09.
Financial Markets
During 2009-10 so far, the domestic equity markets have been on the rise reflecting
the global trend and increased optimism regarding the Indian economy. FII’s have
made net investment of US$ 7.8 billion in 2009-10 (up to July 22, 2009) as against net
disinvestments of US$ 4.0 billion during the corresponding period of 2008-09.
(Source:RBI)
Events Ahead
The Second Quarter Review of Monetary Policy for 2009-10 will be undertaken on
October 27, 2009.
Policy Rates
Bank Rate 6%
Reverse Repo Rate 3.25%
Repo rate 4.75%
Reserve Ratio
CRR 5%
Bank Rate kept unchanged at 6%.
Repo rate and Reverse Repo Rate kept unchanged at 4.75%& 3.25%
respectively.
Cash Reserve Ratio (CRR) kept unchanged at 5%.
Real GDP growth projection for FY10 is placed at 6.0%.
WPI inflation is projected at around 5% by end-March 2010 vs. 4.0%
projected earlier. The base effect, which is generating negative inflation is
projected to completely wear off by October 2009.
Macroeconomic and Monetary Developments
The Real Economy
The Indian economy grew by 6.7% in 2008-09 according to the revised estimates of
the Central Statistical Organisation (CSO) lower than the growth of 9.0 %in 2007-08.
The deceleration in GDP growth was largely due to the adverse impact of the global
economic crisis.
Price Situation
The WPI inflation, which was on a path of sharp decline from the high peak level of
August 2008, turned negative in June 2009, and since then the negative inflation
continues (-1.17 per cent as on July 11, 2009). The decline in the year-on-year
inflation essentially reflects the statistical factor of high base that emanated from
sharp increases in commodities prices during the first half of 2008-09.
Financial Markets
During 2009-10 so far, the domestic equity markets have been on the rise reflecting
the global trend and increased optimism regarding the Indian economy. FII’s have
made net investment of US$ 7.8 billion in 2009-10 (up to July 22, 2009) as against net
disinvestments of US$ 4.0 billion during the corresponding period of 2008-09.
(Source:RBI)
Events Ahead
The Second Quarter Review of Monetary Policy for 2009-10 will be undertaken on
October 27, 2009.
Policy Rates
Bank Rate 6%
Reverse Repo Rate 3.25%
Repo rate 4.75%
Reserve Ratio
CRR 5%
Indian mkts to grow at 15% CAGR in next 5 yrs: Amansa Cap
The stock market has been topsy-turvy since the Union Budget. A big one-week sell-off followed by a big one-week comeback and the Nifty is perched again near the 4,500 mark.
In an interview , Akash Prakash, Fund Manager and CEO, Amansa Capital discussed the future outlook for the stock markets. He said he was a little cautious on the global markets. “I still feel that the US and Organization of Economic Cooperation and Development (OECD) economies have serious economic problems and again the investors are getting a little complacent in those markets. I think the markets will stabilise or remain rangebound for sometime,” he said.
In an interview , Akash Prakash, Fund Manager and CEO, Amansa Capital discussed the future outlook for the stock markets. He said he was a little cautious on the global markets. “I still feel that the US and Organization of Economic Cooperation and Development (OECD) economies have serious economic problems and again the investors are getting a little complacent in those markets. I think the markets will stabilise or remain rangebound for sometime,” he said.
Calls for the 28th july
RESEARCH-Nifty(FUT) R-4615/4655/4740 S-4570/4530/4485 ;Sensex(CASH)
R-15480/15590/15820 S-15355/15245/15120 ;MARKET
OUTLOOK:VOLATILE(08.55A)
R-15480/15590/15820 S-15355/15245/15120 ;MARKET
OUTLOOK:VOLATILE(08.55A)
--
RESEARCH: MARKET OUTLOOK: For the day, market would remain highly volatile on positive side ahead of F&O market expiry 30th July 2009. If NIFTY stays above 4601, NIFTY could move towards 4636 and 4693 levels. On the downside, NIFTY is likely to find support at 4554 and 4528. If it moves below, it may come down to 4505 levels. RBI's monetary policy announcement scheduled today would dictate the trend of the market.
9:39 AM 7/28 RESEARCH-Global Market (in %): DOW JONES (+0.17%), S&P 500 (+0.30%), NASDAQ (+0.10%), FTSE (+0.21%), DAX (+0.42%), NIKKEI(-0.29%), HANG SENG (+0.54%) & SGX NIFTY (+8.5 POINTS)
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